When I first heard about Groupon, it was intriguing. I ended up buying a couple of items on it - one for a handyman and the other for a fitness center. I was feeling pretty good about the money I saved ( Of course I never was looking to buy these items but oh well..)
A couple of weeks later we had a problem and needed an handyman and I said 'Hey I have this coupon why don't we call them'. Of course I was frustrated, when we were told that they were not available until 1 month out.
The challenge with the groupon model is:
- The services that advertise there are not necessarily the ones who you typically use. Ideally it should be the other way around - you should get a coupon for a service you like.
- The groupon model is based on local service providers giving you a good deal. But there is no easy way for a provider like a handyman to suddenly scale if they get 900 buyers from groupon - unlike say a provider of a digital, electronic good. The providers are not equipped to handle the volume, get overwhelmed and it can be a bad experience.
- Almost no service provider say restaurant, has a 75% margin which is what groupon requires ( you have a deal 50% off and give 1/2 of sale to Groupon). Most of them take on the terms because they think they will get repeat customers so the groupon deal is a customer acquisition cost. But if you don't get repeats, it won't work. Right now Groupon can ask for 50% of sale because they are one of two games in town ( livingsocial is the other) - over time, they won't be able to.
What do you think - there a lasting model here? Maybe it works for certain types of products not others.
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